What is a partially self-funded health insurance plan?

You’re going to start hearing a lot about “partially self-funded” health insurance plans for small businesses.

There are good reasons to consider such a plan for your small business. In fact, a partially self-funded health insurance plan is a downright compelling solution for many small groups.

How a Partially Self-Funded Health Insurance Plan Works

A partially self-funded health insurance plan looks, sounds, smells, and tastes like a traditional health insurance plan. Structured properly, there won’t be any risk to you.

Here’s how it works:

You pay your premiums just as you do now. A portion of those premiums goes into a claims fund that will be used to pay the first portion of health claims that arise in your group. So as in a traditional self-funded plan, you are actually paying your employees’ claims. But unlike a true self-funded plan…

You have an “aggregate deductible” for claims. Once you’ve reached that number, the insurer takes over the payment of claims. (The remainder of the premium you pay is the cost of this aggregate insurance.)

There is no risk to you. Your premiums are calculated to fund the claims fund to the aggregate deductible amount. So you are paying for your worst-cast scenario.

You could actually get a refund at the end of the year. If you don’t use up the money in your claims fund you’ll get it back (or apply it to next year). So while there’s no risk, there is a possibility of some reward if your employees have a good health year.

There’s one more significant reason you should consider a partially self-funded health insurance plan (and why so many insurance companies are introducing these plans):

Because they are not considered “fully insured” plans, they are not necessarily subject to all of the mandates of the Affordable Care Act (“Obamacare”). Consequently, these plans are a better value (and price).

Partially Self-Funded Plans aren’t for Everyone

Some groups will save a lot of money with this approach, but these plans won’t work for everyone.

Unlike other group health insurance plans, partially self-funded plans are still subject to underwriting. For that reason, groups that are younger and healthier will find significant advantages with such a plan.

On the other hand, these plans might not work for a group with a history of significant medical claims. We can help you find out if it’s a viable solution for your business.

How Many Employees Are Required?

Self-funded health insurance plans have traditionally not been available to groups with fewer than 50 employees. But things have changed.

In most states, partially self-funded plans are currently available for companies with as few as five employees.

How Much Can We Save with a Partially Self-Funded Plan?

In recent experience in both South Carolina and Georgia, partially self-funded health insurance plans are coming in at a significantly lower price than traditional group health insurance policies.

As an example, one of our small business clients saved $46,000 in a year without decreasing their benefits or increasing their out-of-pocket costs. A partially self-funded health insurance plan is a big part of that savings.

AC Forrest can work with you to assess whether a partially self-funded health insurance plan is a good fit for your company. Contact us today to schedule a free, no-obligation consultation to learn more and get comparative quotes for your business.